Academic errors on biofuel, ag policy

Which direction the sun comes up in the morning is an academic issue, not a matter of opinion. If on the nightly news it was reported that the sun comes up in the West as fact, you’d lose faith in the validity of the broadcast pretty fast, to the point of questioning the creditability of the broadcaster.

Major media sources and even a presidential candidate, John McCain, have been making academic errors telling everyone that the sun comes up in the West regarding biofuel and ag policy. From someone who knows which direction the sun actually rises, it’s been rather frustrating and incredible to see this misinformation be distributed to the public as fact.

When you hear a major network report as fact that global wheat and rice shortages were created because of biofuels, they just told an academic lie. Biofuel development had no impact on wheat and rice acres or the recent higher prices evidenced in those markets. Biofuel happened to be in the neighborhood when global/consumer demand surged and poor yields were produced and were blamed for the result as a convenient suspect. Biofuel was made guilty without evidence to convict by an incompetent media who has not done its job relative to agriculture.

Ag Committee Chairman, Collin Peterson, expressed great frustration with the media in a news conference, “The problem is we’ve got editorial writers still, to this day, writing that the whole $300 billion (in the Farm Bill) goes to farmers.

The truth is, out of the $300 billion, something like $36 or $40 billion goes to farmers. The rest, the majority, goes to nutrition and conservation. I implore my friends in the press to help us get people to understand just how this is structured.”

Instead, virtually every news story on the Farm Bill says $300 billion is going to rich farmers when only 16.1% of that total goes to commodity programs, crop insurance and disaster income. That total is down from 28.5% in the previous bill, the one that George W. signed, written by Republicans, in 2002.

They saved $20 billion in the commodity title of the current bill. That’s not the spin opponents want. 73.5% of Farm Bill spending goes to food programs. These are academic facts being distorted by everyone from the Wall Street Journal on down who are slanting their reporting, focused entirely on subsidy means testing which has been substantially tightened too.

It’s the same story with food versus fuel. John McCain tells everyone the reason food prices have gone up is ethanol, so the Renewable Fuels Standard (RFS) needs rolled back. He’d get rid of the Blenders Credit and tariff too. Finally, USDA Ag Sec Ed Schafer stepped up and commented recently in an attempt to straighten out what has been the press reporting verbatim inaccuracies as fact in the fuel versus food debate. “We think the time has come for USDA to join in the conversation of food and biofuels. There is not a one-on-one relationship between commodity prices and food prices.”

First of all, the Ag Sec was late to the debate. The Bush Administration let inaccuracies go unanswered so the press ran with them. They even supported inaccuracies portrayed by the press in their political opposition to the Farm Bill.

Scott McClellen’s successor is now sponsoring the Farm Bill. The administration is more friendly to biofuels. The USDA belatedly but correctly told the public what we have been saying - that food is only 20% of the retail food dollar.

The Council of Economic Advisors say that yes, corn prices have gone up sharply but only contributes about 3% to the commodity portion, the 20% of the food dollar. There is not the direct one-on-one link between corn prices and ethanol and food prices that John McCain has claimed in his letter asking for an EPA waiver from the RFS.

Here are academic facts that have not been reported correctly by the mainstream media. A family of four in 2007 spent $9,828 on food (USDA) and $4,549 on gasoline (EIA). In 2008, if there were no biofuel, food expenditure for the family would have been $24 lower. Yes, biofuels cost a family of four $24 in higher food costs, according to the Council of Economic Advisors Ed Lazear. Biofuel, however, lowers what that family of four pays for gasoline.

If you heard a media report that all oil from Nigeria, the U.S. 6th largest oil exporter, was being embargoed by John McCain, what do you suppose it would do to the U.S. oil market? U.S. biofuel production equals oil imports from Nigeria.

The price of gasoline would soar, wouldn’t it? In both aggregate supply and refinery capacity, ethanol lowers the price of gasoline. If biofuel was eliminated, that family of four would pay more for gasoline, $560 a year more according to LECG economist John Urbarchuk, $784 a year according to Merrill Lynch research and possibly even $1616 more per year in a worst case scenario calculated by ISU’s Center for Ag and Rural Development.

The family of four would save $24 on food and spend from $536-1592 more on gasoline without ethanol and biofuel. Without ethanol to lower fuel costs, higher fuel costs would raise food prices more than biofuels have.

John McCain and his 23 GOP Senator partners asking for an EPA RFS waiver are telling you the sun comes up in the West as their contribution to the food versus fuel debate. Ethanol has lowered fuel prices, saving consumers far, far more than the increase in the price of corn has raised food prices. The sun comes up in the East.